Insurer Not Liable in Bad Faith for Not Settling Claim Following Fatal Southern California Crash

Isuzu_D-Max_crash_1An insurer emerged victorious in a bad faith lawsuit arising from a fatal auto accident in which the insurer’s insured, a teen driver, caused an accident that killed his passenger. The California Court of Appeal decided that it was not bad faith for the insurer not to pay for a settlement that the insured negotiated “behind the back” of the insurer.

The case centered on a fatal auto accident in San Bernardino County. Cy Tapia, a teenage who lived with his aunt and grandmother, was driving a truck owned by his grandfather when he crashed. Tapia’s passenger, Cory Driscoll, eventually died from injuries he sustained in the accident. Driscoll’s family sued. Although the teen’s grandfather owned the car, Tapia’s sister insured the vehicle. The sister’s insurance policy had a limit of $100,000. The insurer, 21st Century Insurance Co., offered to settle for $100,000. The Driscoll family, believing that the teen might be covered under two $25,000 policies held by the grandmother and the aunt, made a limited-time settlement offer of $150,000. The insurance company did not respond in time but later made its own $150,000 settlement offer.

Eventually, the family made a statutory settlement offer of $4.15 million. The insurance company notified Tapia that it would not pay if the teen chose to accept the offer. Nevertheless, Tapia agreed, without the insurer’s consent, to a stipulated judgment in the amount sought by the Driscoll family. Tapia assigned his rights to any bad faith claim against 21st Century to the Driscolls.

After that, the Driscoll family launched a bad faith suit against the insurance company, and 21st Century made a motion for summary judgment. The trial court rejected the motion, but the appeals court sided with the insurer. Under California law, if an insurance company is providing a defense to the insured, and the insured “goes behind the insurer’s back” to settle the case, the insurance company is not necessarily bound by the settlement.

The lack of an adversarial trial and judgment issued by a jury or trial judge can be key. Without it, there can be an obvious risk, as the court pointed out, that a negligent driver and his victim could collude to settle and accept whatever amount of damages the victim wanted to claim, and this could leave the insurer on the hook.

Another substantial weakness in the case against the insurer was that it was not bad faith for the insurer not to pay based on the two $25,000 policies. The terms of those auto policies, held by each of the aunt and the grandmother, made it clear that the truck was not covered. The sister’s policy clearly listed the truck as a covered vehicle and Tapia as a covered driver. Neither of the two smaller policies listed either the teen or the truck on their coverages. As a result, 21st Century’s decision to offer $100,000, and not immediately offer $150,000, was not proof of bad faith.

Decisions regarding the settlement of auto accident claims can be very complicated. Experienced legal counsel can help you parse through all of your options and make a decision that best suits your needs. For reliable advice and skillful representation, contact the Oakland car accident attorneys at the Law Offices of Stephen M. Fuerch. Our injury law attorneys have many years of experience helping accident victims like you. Contact us through our website or call our office at (925) 463-1073 to schedule your confidential initial consultation.

More Blog Posts:

California Accident Victim Entitled to Recover Full Amount of Past Medical Expenses, Despite Medical Providers’ Sale of Lien at a Discount, Oakland Personal Injury Attorney Blog, Nov. 16, 2015

California Court Says Passenger May Be Liable to Victims for Her Exhortations to Driver in Fatal Crash, Oakland Personal Injury Attorney Blog, Nov. 16, 2015